Bulls Win in Holiday Shortened Trading...

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Stock Market Trends:

- ETF Positions indicated as Green are Long
ETF positions and those indicated as Red are
short positions.

- The State of the stock market is used to determine how you should trade.
A trending market can ignore support and resistance levels and maintain its
direction longer than most traders think it will.

- The BIAS is used to determine how aggressive or defensive you should be
with an ETF position. If the BIAS is Bullish but the stock market is in a Trading
state, you might enter a short trade to take advantage of a reversal off of
resistance. The BIAS tells you to exit that ETF trade on "weaker" signals than
you might otherwise trade on as the stock market is predisposed to move in
the direction of BIAS.

- At Risk is generally neutral represented by "-". When it is "Bullish" or "Bearish" it
warns of a potential change in the BIAS.

- The Moving Averages are noted as they are important signposts used by the
Chartists community in determining the relative health of the markets.

Best ETFs to buy now (current positions):

Long DIA at $161.48 as of December 19, 2013
Long QQQ at $85.99 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013

Value Portfolio:

Long SDRL at $33.90 on June 15, 2012 (Shares were put to us when options expired.
We were paid $1.10 per share when we sold those options and bought shares for
$35.00 each.) We have collected dividends: June 10, 2014 $1.00, March 5, 2014
$0.98, December 3, 2013 $0.95, September 5, 2013 $0.91, June 5, 2013 $0.88,
$1.70 Dec 4, 2012, $0.84 Sep 4, 2012. Total = $6.28 in dividend payments.
Short FXE at $124.19 on August 24, 2012
Long UUP at $22.43 on August 24, 2012
Short FXE at $134.48 on October 4, 2013
Long SDRL at $35.43 on Feb 18, 2014
Long SDRL at $33.50 on March 21, 2014 (Shares were put to us when options expired.
We were paid $1.50 per share when we sold those options and bought the shares
for $35.00 each.) We have collected dividends: June 10, 2014 $1.00.
Short GLD at $26.38 on July 3, 2014

Equities gapped up at the open, traded mostly sideways for the first hour
then headed higher the rest of the holiday shortened session, with the exception
of the final fifteen minutes which was some selling action. Still, it was enough
for all the major indexes to record fractional gains with the Dow and S&P-500 closing
at new all time highs and the NASDAQ-100 at a multi-year high. All equity
indexes we regularly monitor closed above their 20-, 50-, and 200-Day Moving
Averages (DMAs). All have a BULLISH BIAS and are in uptrend states. All posted
gains. Longer Term Bonds (TLT 110.68 -0.40) posted a fractional loss
and shifted to a downtrend state. It closed below its 20- and 50-DMAs and maintains
a NEUTRAL BIAS. Trading volume was very light with 402M shares traded
on the NYSE and trading volume on the NASDAQ also fell to very light with 986M shares
traded due to an early close ahead of the Fourth of July U.S. holiday.

There were ten economic reports of interest released:
• Challenger Job Cuts (Jun) fell -20.2% versus May's +45.5%
• Non-farm Payrolls (Jun) came in at 288K versus an expected 210K
• Non-farm Private Payrolls (Jun) came in at 262K versus an expected 213K
• Unemployment Rate (Jun) came in at 6.1% versus an expected 6.3%
• Hourly Earnings (Jun) rose +0.2% as expected
• Average Workweek (Jun) came in at 34.5 hours as expected
• Initial Jobless Claims for last week came in at 315K as expected
• Continuing Jobless Claims for last week came in at 2.579M versus an
expected 2.580M
• Trade Balance (May) came in at -$44.4B versus an expected -$45.2B
• ISM Services (Jun) came in at 56.0 versus an expected 56.5
All but the last report were released an hour or more before the open. ISM
Services came out a half hour into the session.

Apple (AAPL 94.03 +0.55) posted a fractional gain. AAPL constitutes
about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 40.22 +0.27) posted a fractional gain. The next
target above remains $40.96, it's closing price on the last trading day of
2013. It is in an uptrend state. We sold March 2014 $35.00 put contracts for
$150 at the open on Feb 18th, 2014 and bought shares at $35.43. The stock is
now trading ex-dividend for $0.98 and one dollar for total dividends issued
of $1.98. The stock fell back to just below its 200-DMA. The shares were
put to us at $35.00 less the $1.50 per share we were paid for the puts, so
we have an effective price of $33.50.

The U.S. dollar rose four tenths of one percent while the Euro fell a like
amount. The dollar continues to trade below its 200-DMA while the Euro failed
to break up through its 200-DMA.

The yield for the 10-year treasuries rose two basis points to close at 2.65.
The price of a barrel of crude oil fell forty-two cents to close at $104.06.
The U.S. government reported a draw down of -3.155M barrels of crude oil last
week.

The implied volatility for the S&P-500 (VIX 10.32 -0.50) fell nearly five
percent to a multi-year low. The implied volatility for the NASDAQ-100 (VXN
11.36 -0.23) fell two percent to a new all time low.

Market internals were bullis. Advancers led decliners 4:3 on the NYSE and
by 2:1 on the NASDAQ. Up volume led down volume better than 2:1 on both the
NYSE and the NASDAQ. The index put/call ratio rose +0.35 to close at 1.39 equity
put/call ratio fell -0.08 to close at 0.49.

Conclusion/Commentary

Holiday shortened trading prior to the Fourth of July holiday is always light
and this session was no exception. Still, market internals were all bullish
as equity indexes mostly hit all time or multi-year highs. This market is still
the bulls to lose. Longer term bond prices continued breaking down. Gold
miners (GDX 26.50 +0.02) closed flat while we advocated shorting at $26.38.
We believe in this trade but will exit the trade on a move higher than $26.90,
which would result in a two percent loss on the trade. We will remain long
equities until we see signs of a reversal.

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